Tesla (TSLA) will report first quarter results after the close in a Shareholder Letter on its website and host a call at 17:30. 

The Street expects Q1 non-GAAP EPS of ($3.53) vs. ($1.33) last year with revenue up 22% to $3.3 billion. 

Model 3 production was below the 2,500 unit weekly target rate but Tesla reaffirmed a 5,000 unit rate for June. 

The Street is skeptical as consensus estimates call for narrowing but still sizeable losses in Q3 and Q4. Tesla is expected to report non-GAAP EPS of $6.88) vs. ($8.66) last year with revenue up 63% to $19.2 billion.

Tesla has a ~$52 billion market cap and trades at ~2.7x sales estimates with an enterprise value ~45x EBITDA estimates. 

The stock broke below $300 for the first time in almost a year in early April before reclaiming that level after Tesla announced better than feared Q1 production. Investors will pay close attention to Model 3 production. 


Tesla prelim Q1 ($3.35) vs ($3.53) Capital IQ Consensus Estimate; revs $3.41 bln vs $3.30 bln Capital IQ Consensus Estimate


Reports Q1 (Mar) loss of $3.35 per share, excluding non-recurring items, $0.18 better than the Capital IQ Consensus of ($3.53); revenues rose 26.4% year/year to $3.41 bln vs the $3.3 bln Capital IQ Consensus. 

Model 3 production hit 2,270/week in April for the 3rd straight week over 2,000

"Our goal is to produce ~5,000 Model 3 vehicles per week in about two months. Model S and X deliveries in Q2 will likely be similar to Q1 but should pick up considerably in Q3 to achieve our goal of 100,000 deliveries for the full year. 

Our long-term gross margin target of 25% for Model 3 has not changed. In the medium term, we expect to achieve slightly lower margin due to higher labor content in certain areas of manufacturing where we have temporarily dialed back automation, as well as higher material costs from recently imposed tariffs, commodity price increases and a weaker US dollar. On the other hand, our average selling price is significantly higher than prior projections, so we expect to achieve higher gross profit per vehicle than we previously estimated. 

With increasing capacity for Powerwall and Powerpack products at Gigafactory 1, energy generation and storage revenues should continue to grow significantly throughout the year. Energy storage gross margins should therefore become positive in the second half of 2018. Our solar business is likely to experience mild growth for another quarter or two before our revised sales strategy starts to show its full impact in final deployments. 

Quarterly non-GAAP operating expenses should grow sequentially at approximately the same rate as in the past four quarters, with our gross profit expected to grow much faster than our operating expenses. Thus, provided that we hit the 5,000 unit milestone in our projected timeframe and execute to the rest of our plan, we will at least be profitable in Q3 and Q4 excluding non-cash stock based compensation and we expect to achieve full GAAP profitability in each of those quarters as well. Also, considering our capex targets, we expect to generate positive cash in Q3 and Q4, including the inflow of cash that we receive in the normal course of our business from financing activities on leased vehicle and solar products. 

We have significantly cut back our capex projections by focusing on the critical near-term needs that benefit us primarily in the next couple of years. At this stage, we are expecting total 2018 capex to be slightly below $3 billion, which is below the total 2017 level of $3.4 billion. Ultimately, our capex guidance will develop in line with Model 3 production and profitability."



Cash Burn

The bears will argue that Tesla is burning more cash than revenue and the rate they are doing so relative to sales is a headwind for the stock. The bear case in this scenario is Tesla will need to raise cash (likely through a secondary) to keep up with their production expectations. This poses a risk as Musk has said they will not raise any more money.